Shares of General Motors Company (NYSE:GM) on Tuesday were advised to buy by Buckingham Research to its client saying that bad news for the automaker has already been priced into the stock.
Analyst Joseph Amaturo wrote: "We believe GM offers a compelling risk/reward ratio over the next six to 12 months," in a note he, set a $35-per-share one-year price target for the company, up about 47 percent from Monday's closing price of $23.80. Shares shot up 50 cents, or 2.1 percent, to $24.30 in premarket trading.
Amaturo wrote that with recovery of the housing industry, sale of pickup trucks should be helped; General Motors should gain significant profit improvement next year as its new full-size pickup trucks go on sale. He also told investors to expect "meaningful" European restructuring announcements in 2013, which will cut future European losses for the company.
General Motors spends $100 billion annually on raw materials which could help the company next year, believes Amaturo. He raised his rating on General Motors stock from "Neutral" to "Buy,"
Will GM Continue To Move Higher? Find Out Here
In the past year, General Motors stocks traded from $18.72 to $27.68. During the summer it bounced around near its lowest point since General Motors initial public stock offering almost two years ago. Though the stock sold for $33, but has been held down by concerns about Europe and the broader economy.
However, U.S. auto sales have remained resilient and are expected to reach more than 14 million this year. That would be up from last year's 12.8 million and the historic low of 10.4 million in 2009. Basically the increase is driven by pent-up demand because cars simply are wearing out and have to be replaced. The average age of a U.S. car and truck is close to 11 years old
"We continue to believe we are in the midst of a multi-year recovery in U.S. light vehicle sales, which should aid GM in regaining U.S. light vehicle market share in 2013 given the company's expected product portfolio," Amaturo wrote. "We expect GM's full-size truck sales volumes to outpace its competitors" because of design and fuel economy improvements, he wrote.
The only caution which Amaturo showed was that while investors are becoming more aware of General Motors huge pension liabilities, they are not fully discounting a drop in profits for General Motors in China and South America, which pose a modest risk to future earnings.
Shares of GM rose 1.60% to $24.18.